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Sunday, December 6, 2015

OPEC Rejects Venezuelan Call for Oil Production Drop (Updated)

Venezuelan voters headed to the polls on Sunday in local elections that are expected to flip the National Assembly to opposition control for the first time since 1999. (Update: The opposition did indeed retake majority control of the legislature and could even reach a "supermajority" that would give them greater say in economic policy).

The ruling party's loss of the legislature would be the second major setback in less than a week for President Nicolás Maduro following disappointment at the latest OPEC talks.

Last Friday, members of the global oil cartel could not reach an agreement over how to boost plunging prices of crude. Venezuelan led a group of countries including Russia, Nigeria and Ecuador calling for a 5% cut in oil production despite the possibility of decreased revenue. Oil minister Eulogio del Pino advocated the move that he believed was preferable to allowing oil prices to continue tumbling.

“The overproduction we have from OPEC is going to produce a catastrophe in the price,” del Pino mentioned prior to a closed-door meeting of the group in the Austrian city of Vienna.

Ultimately, however, del Pino and his cohorts were allegedly rebuffed by nations who believe that allowing prices to fall will hurt non-OPEC entities such as U.S. shale oil firms.

Following OPEC's decision the price of Venezuelan oil slid down to $34.93 per barrel, which is the lowest price since 2009. The average price in 2014 for Venezuela's mix of heavy and medium crude was $88.42. One year later it has been reduced by almost 50% to $45.87.

Oil is the main export of Venezuela and accounts for 95% of the country's export earnings. Its plunging value has exacerbated the country's economic difficulties including shortages of basic goods like food and medicine as well as deepening poverty rates. This has in turn led to greater pessimism with the government including 85% of Venezuelans dissatisfied with the Maduro regime based on a recent Pew Research Center study.

After voting in elections earlier today, Maduro railed against an “international financial blockade” that has plotted to economically “destabilize” Venezuela. Yet he also took a more conciliatory tone regarding what will likely be an opposition-led legislature:

“Without a doubt our main task is economic recuperation. Overcoming the economic war (and) beating profiteers and counterfeiters…will be the primary goal of the new National Assembly. I propose a series of working meetings with the new deputies once they're sworn in so we can find common points for development of the country.”

The OPEC's actions last week did not sit well with Ecaudoran President Rafael Correa who blamed the cartel for favoring the U.S. at the cost of countries like his.

“If you increase production prices will drop, while if you reduce production prices will not rise. From a technical standpoint it doesn't make sense,” said Correa about OPEC's “incomprehensible” move.

YouTube Source - PressTV (“The Venezuelan government (last month) announced an increase on taxes to compensate for the falling income from oil sales”.)Online Sources (English) - CNNMoney, Barron's, Bloomberg, Latin American Herald Tribune, The Guardian